Clause 17 - Effect of pensioner postponing or suspending state pension

Part of Pensions Bill – in a Public Bill Committee at 11:45 am on 4 July 2013.

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Photo of Mark Reckless Mark Reckless Conservative, Rochester and Strood 11:45, 4 July 2013

I thank the Minister for his explanation. His overall point that  the policy should be actuarially fair, and the evidence he has produced for that, means that there is no need for a positive resolution statutory instrument, but the debate has drawn out some important issues. I am a little sceptical about some of his numbers. It is not that I am sceptical about him or his analysis; I simply emphasise the uncertainty around the issue.

The number of people working past traditional retirement ages—perhaps an extra 1 million people—makes the uncertainty great. There is also the change in the pension requirements whereby employers cannot make people retire. Because of the way that changed, and because of the cut-off date, I fear that a significant number of people were forced into retirement prior to that date who would have preferred not to retire—the employer knew they would not be able to carry on afterwards—and that reduced the number of people temporarily who might have carried on working later and increased the chance of deferral.

After that, some people were able to carry on working. At the same time, there were significant pressures—the collapse in annuity rates because of the more general problems in the economy—on older people to keep on working. I think, therefore, that there are strong pressures pushing many more people into working longer. With that, there is at least a stronger rational argument for many of those people to defer their pensions, particularly given the generosity of the existing scheme. It is important to emphasise the availability of that generosity in relation to people of a certain generation retiring before April 2016. I asked the Minister on Second Reading about people whose retirement date was before April 2016 but who had triggered a deferral, and whether they could carry on deferring at the more generous rate post-April 2016. I recall that he answered, “Yes, they could”, but for some extraordinary reason it does not appear to have been picked up by Hansard, so if he could confirm that for my constituents again now, I would be grateful.

On the Minister’s numbers, he mentioned an extra £200 million by 2020, over a seven-year period from now, but an extra £300 million by 2030. Did he mean an extra £300 million in addition to the £200 million? If not, I do not understand why the amount by which that sum was rising would only be £10 million per year during the decade of the 2020s, given the £30 million or so per year in the earlier period.

The option is not particularly well known, and a lot of people might not have made rational decisions about it, but I wonder whether in a world where more people are working longer, it might become something that people are better advised and informed on and whether, particularly in the three years to April 2016, we might see significantly more people taking that option, not least because they could entrench the right to continue deferring past April 2016.

The situation will therefore be actuarially fair afterwards, but even that raises questions, because I am assuming that the deferral rate will be common for men and women, which suggests that—at least on the way such things used to be done—it will be actuarially generous for women and stingy for men. Are we required to do this on the basis of the European Court of Justice  ruling, or does it apply only to private sectors? Is the Minister choosing to do it that way for the state pension, or does EU law now require it? Will he and the Treasury look more closely at the sums involved and emphasise trying to understand how the sums could build up over the next few years? I wonder whether the sums’ incentive could be significantly greater than might have been assumed. I entirely recognise, however, the difficulty of the environment for modelling likely take-up, given the large things happening to the economy and the ability to carry on working past retirement age.